C.H. Robinson is caught in the middle

Transportation broker C.H. Robinson Worldwide Inc. turned in mixed first-quarter results Tuesday as the company met earnings expectations but said it hadn't been keeping up with rising trucking costs.

The company earned $106.5 million, or 65 cents a share, up 10 percent -- meeting analysts' expectations of 65 cents. Revenue of $2.55 billion was up 8 percent. Robinson is a "third-party logistics" company, a middleman that matches shippers with trucking firms that can carry their freight. It also deals with railroads, ocean-going ships and air cargo firms.

The earnings were released after the market closed. Robinson stock closed Tuesday at $65.83, up 30 cents or less than 1 percent.

During a conference call with company officials, analysts focused on Robinson's trucking business, where shipping volumes rose 8 percent, but net revenue margins declined because of rising fuel costs and higher prices to hire trucks.

Net revenue is the difference between what Robinson charges a shipper and what it pays a trucker to haul the freight. During the first quarter, Robinson didn't raise the prices it charged shippers fast enough to keep up with rising shipping costs.

Excluding the cost of fuel, the cost of hiring trucks rose 2 percent in the quarter, while the prices Robinson charged shippers rose 1 percent. Robinson said price increases are negotiated separately with each shipper, and typically lag behind an increase in truck hiring costs.

"When the market tightens, as it is now, we see costs increase quickly, while we adjust our pricing customer by customer as it's appropriate," said Robinson CEO John Wiehoff.

"Overall, the quarter was mixed," said Matt Young, an analyst with Morningstar Inc. in Chicago. "Trucking volume was a little stronger than I expected, demand seems stable and Robinson is taking market share in the trucking industry. But the rates Robinson is being charged for trucks are rising, and there hasn't been a lot of opportunity for Robinson to charge higher prices for its service."

Like other analysts on the conference call, Young said he wonders when Robinson will be able to increase prices to help improve margins. Young noted that industry trends -- increased shipping and increased use of brokers like Robinson -- appear to be going Robinson's way.